Tallakoy, LP v. Black Fire Energy, Inc.

NOT RECOMMENDED FOR FULL-TEXT PUBLICATION
File Name: 17a0132n.06
Case No. 15-6322
UNITED STATES COURT OF APPEALS
FOR THE SIXTH CIRCUIT
FILED
Feb 28, 2017
TALLAKOY, LP; TALLAWAH, INC.; AKOYA ) DEBORAH S. HUNT, Clerk
GROUP, LTD.; JASON BEDASSE; GARTH )
MYERS; TALLAKOY GP, INC., )
) ON APPEAL FROM THE
Plaintiffs-Appellees, ) UNITED STATES DISTRICT
) COURT FOR THE EASTERN
v. ) DISTRICT OF KENTUCKY
)
BLACK FIRE ENERGY, INC.; BLACK FIRE )
MINING, LLC; GILL STEVEN BROWN, )
) OPINION
Defendants-Appellants, )
BEFORE: COLE, Chief Judge; DAUGHTREY and MOORE, Circuit Judges.
COLE, Chief Judge. The parties entered into a Revenue Participation Agreement
(“RPA”) in which they agreed that any disputes arising from that contract would be resolved
through an arbitration proceeding. Plaintiffs-Appellees Tallakoy LP; Tallakoy GP, Inc.;
Tallawah, Inc.; Akoya Group, Ltd.; Jason Bedasse; and Garth Myers filed a complaint on
December 23, 2014, seeking to enforce an award they obtained in an arbitration proceeding.
Defendants-Appellants Black Fire Energy, Inc.; Black Fire Mining, LLC; and Gill Steven
Brown, (collectively, “Defendants” or “Black Fire”), filed a motion to dismiss the complaint on
the ground that the award was invalid and unenforceable. The district court construed the motion
to dismiss as a motion to vacate the award and denied the motion as untimely. Black Fire
No. 15-6322, Tallakoy, et al. v. Black Fire, et al.
thereafter filed a motion under Federal Rule of Civil Procedure 59(e) to vacate the judgment and
under Rule 60(b) for relief from the judgment. The district court denied both motions. We
reverse and remand for further proceedings consistent with this opinion.
I. BACKGROUND
A. The Parties Form a Contract
Tallakoy LP; Tallakoy GP, Inc.; Tallawah, Inc.; and Akoya Group, Ltd., (collectively,
“Plaintiffs” or “Tallakoy”), are investment companies. Jason Bedesse and Garth Myers are
principals and operators of Tallakoy. In May 2012, Tallakoy invested in a mining operation in
Pike County, Kentucky, known as Heller Mine. Tallakoy purportedly made the investment
based on its review of promotional materials distributed by Black Fire. Nicholas Stodin, as
signatory for Black Fire Energy, Inc., and Bedasse and Myers, as signatories for Tallakoy,
entered into the RPA. The RPA included an arbitration clause in § 7.2:
Any dispute arising from this Agreement that cannot be resolved by the Parties
themselves shall be settled by binding arbitration by an agreed upon arbitrator or,
alternatively, by a panel of three arbitrators in the event the parties are unable to
agree on one arbitrator. The arbitration will be conducted in Kentucky in
accordance with the rules of the American Arbitration Association. Any
judgment rendered by arbitration shall be considered as final and binding and may
be entered into the Kentucky courts having jurisdiction.
(Tallakoy II RPA, R. 13-3, PageID 167.)
B. Tallakoy I
In June 2013, Tallakoy sued Black Fire, “seeking compensatory, liquidated and punitive
damages, as well as injunctive relief.” (Tallakoy I Compl., R. 1, PageID 5−6.) Tallakoy alleged
that Black Fire “induce[d] [Tallakoy] to invest nearly $1,000,000 into a sham eastern Kentucky
mining operation [Heller Mine], owned and operated by [Black Fire, which] . . . then misapplied
the investor funds to other operations and for [Black Fire’s] own personal enrichment.” (Id.)
Black Fire moved to dismiss the complaint on the ground that RPA § 7.2 required the dispute to
No. 15-6322, Tallakoy, et al. v. Black Fire, et al.
be resolved by arbitration. On October 29, 2013, the district court granted Black Fire’s motion,
thereby dismissing Tallakoy I for lack of subject matter jurisdiction. The court directed the
parties to arbitrate the dispute under the RPA.
Sometime thereafter, Tallakoy engaged a single arbitrator who conducted an arbitration
proceeding concerning the parties’ dispute without the participation or involvement of Black
Fire. The arbitrator issued an award (“the Award”) in Tallakoy’s favor on September 23, 2014.
On October 24, 2014, Tallakoy filed a motion in Tallakoy I to enforce the Award. Stodin
claimed that he, and hence Black Fire, first learned of the arbitration proceeding and the Award
on October 27, 2014. Stodin says he contacted the American Arbitration Association (“AAA”)
to determine whether it had any record of an arbitration between Tallakoy and Black Fire, given
that the RPA required any arbitration to be conducted in accordance with the rules of the AAA.
On November 21, 2014, Stodin, through his agent, filed a notice in the district court stating that
the AAA had no record of an arbitration proceeding between Black Fire and Tallakoy.
On December 19, 2014, the district court denied Tallakoy’s motion to enforce the Award,
noting it no longer had jurisdiction over the dispute because the case had been administratively
closed. The court suggested that Tallakoy file a new complaint and seek enforcement of the
Award in that case.
C. Tallakoy II
Apparently in furtherance of the district court’s suggestion, Tallakoy filed a complaint,
with the Award attached, to enforce the Award on December 23, 2014. On March 4, 2015,
Black Fire moved to dismiss the complaint, arguing that “the award that Plaintiffs seek to
enforce was knowingly obtained in direct violation of the Parties’ arbitration agreement, and
therefore is invalid and unenforceable.” (Tallakoy II Mot. to Dismiss, R. 13-1, PageID 107.)
No. 15-6322, Tallakoy, et al. v. Black Fire, et al.
The district court denied Black Fire’s motion, which it construed as a motion to vacate, finding
“[w]hatever the merits of Black Fire’s allegations, they come too late.” (Tallakoy II Order,
R. 21, PageID 235.) Black Fire then moved to alter or amend the decision and to vacate the
judgment under Rules 59(e) and 60(b) on the basis that the district court erred in its
determination of the date by which Black Fire had to challenge the Award. Black Fire also
argued that the Award is invalid because it violates the terms of the RPA, the court’s order to
arbitrate in Tallakoy I, the AAA rules, and the Federal Arbitration Act (“FAA”), 9 U.S.C. §§ 1–
16. The district court denied that motion on October 22, 2015.
This appeal followed.
II. ANALYSIS
A. Standard of Review
Black Fire appeals the district court’s denial of its motions under Rules 59(e) and 60(b).
We review the denial of a Rule 59(e) motion for abuse of discretion, reversing only when the
district court (1) relies on clearly erroneous findings of fact, (2) improperly applies the law, or
(3) uses an erroneous legal standard. Nolfi v. Ohio Ky. Oil Corp., 675 F.3d 538, 552 (6th Cir.
2012); Intera Corp. v. Henderson, 428 F.3d 605, 619–20 (6th Cir. 2005). A Rule 60(b) motion
allows the court to “relieve a party or its legal representative from a final judgment, order, or
proceeding” in cases where there has been
(1) mistake, inadvertence, surprise, or excusable neglect; (2) newly discovered
evidence that, with reasonable diligence, could not have been discovered in time
to move for a new trial under Rule 59(b); (3) fraud (whether previously called
intrinsic or extrinsic), misrepresentation, or misconduct by an opposing party;
(4) the judgment is void; (5) the judgment has been satisfied, released, or
discharged; it is based on an earlier judgment that has been reversed or vacated; or
applying it prospectively is no longer equitable; or (6) any other reason that
justifies relief.
No. 15-6322, Tallakoy, et al. v. Black Fire, et al.
Fed. R. Civ. P. 60(b). “We review the district court’s decision on a Rule 60(b) motion under the
same [abuse of discretion] standard.” Burrell v. Henderson, 434 F.3d 826, 831 (6th Cir. 2006).
B. Timeliness
The FAA requires a party to challenge an arbitration award “within three months after the
award is filed or delivered.” FAA § 12. The FAA does not define “filed” or “delivered.”
However, the AAA Rules, which the parties agreed to follow in their RPA, provide that:
Parties shall accept as notice and delivery of the award the placing of the award or
a true copy thereof in the mail addressed to the parties or their representatives at
their last known addresses, personal or electronic service of the award, or the
filing of the award in any other manner that is permitted by law.
Am. Arb. Ass’n Com. Arb. R. & Mediation Proc. R. 49, available at
https://www.adr.org/aaa/faces/rules/searchrules/rulesdetail?doc=ADRSTG_004130 (“AAA R.
49”).
Tallakoy argues that there are six possible dates for when the Award was “filed or
delivered,” all of which would make Black Fire’s March 4, 2015 challenge untimely, assuming
Black Fire first challenged the Award in the motion to dismiss filed on that date. Black Fire
argues that December 23, 2014, when Tallakoy filed its complaint in Tallakoy II and attached a
copy of the Award, constitutes the “start date” under the FAA and the AAA rules and thus is the
appropriate date to begin Black Fire’s three months to contest the Award. If Black Fire is
correct, its March 4, 2015 challenge to the Award was timely filed.
We first address the three dates considered by the district court and then address the other
dates proposed by Tallakoy.
No. 15-6322, Tallakoy, et al. v. Black Fire, et al.
i. September 23, 2014
1. Filing
The district court determined that Black Fire’s time to challenge the Award actually
began to run on September 23, 2014, when the arbitrator issued the Award. The district court
reasoned that FAA § 12’s reference to “filed” means the date on which the Award was issued.
Thus, in the district court’s view, the Award was filed on the date it was issued. As noted, the
FAA does not define what it means for an arbitration award to be filed or delivered.
The district court’s determination that “filed” means “issued” does not comport with the
plain language of FAA § 12. If “filed” always means “issued,” then the phrase “or delivered”
would be superfluous because an award would always be “filed” immediately upon issuance and
there would be no need for “delivery.” See Bennett v. Spear, 520 U.S. 154, 173 (1997) (“It is the
cardinal principle of statutory construction that it is our duty to give effect, if possible, to every
clause and word of a statute rather than to emasculate an entire section.”) (internal quotation
marks and alterations omitted); see also Eagle Energy, Inc. v. Dist. 17, United Mine Workers of
Am., 177 F.R.D. 357, 358 (S.D.W.Va. 1998) (“Nor would we be justified in excising ‘delivered’
from the statute.”). If Congress meant for the three-month period to commence once an award is
issued, it knew how to say that. See Bennett, 520 U.S. at 173. Therefore, it runs counter to
principles of statutory interpretation to find that the issuance date, when there is no other
evidence of filing, is automatically the date on which the award was filed.
The district court relied on three cases to support the proposition that “filed” always
means “issued.” However, these cases do not change the statutory legal analysis. None of them
analyze the definition of “filed” or explain why the court should consider the date of issuance as
the date of filing. In re Robinson, the only precedent from this court cited by the district court,
No. 15-6322, Tallakoy, et al. v. Black Fire, et al.
devotes only two sentences to this issue. 326 F.3d 767, 772 (6th Cir. 2003). Robinson found
that “[t]he arbitration award appears to have been entered on June 18, 1999, and to have become
final fifteen days later, while Robinson’s objection was not filed until February 11, 2000.
Therefore, Robinson did not meet the three month deadline set forth in FAA § 12.”
Robinson did not identify which date it used. Rather it found that the period before the motion to
vacate was filed was so long that the motion could not have been timely. The court did not
analyze the significance of the issuance date or what filing meant. Therefore, Robinson does not
support the conclusion that we should automatically consider the issuance date as the filing date.
The district court relies on two other cases, one from the Fourth Circuit and another from
the District of Maryland, in its determination that an arbitration award is filed when issued. In
Taylor v. Nelson, the Fourth Circuit used the date of issuance as the date it considered an award
to have been filed. 788 F.2d 220, 225 (4th Cir. 1986). The court did not directly address why
the issuance date should mean filing date and instead focused on reasons the three-month period
should not run from the date of a motion for confirmation of the award.
Similarly, the district court relies on a case from the District of Maryland that found that
the filing date was the issuance date. However, the court’s inquiry in that case was focused on
when a decision is considered final rather than whether issuance of an award is synonymous with
filing under the FAA. Parsons, Brinckerhoff, Quade & Douglas, Inc. v. Palmetto Bridge
Constructors, 647 F. Supp. 2d 587, 593 (D. Md. 2009).
There are at least two circuits that have not followed the Fourth Circuit’s view. The
Seventh Circuit determined that the issuance date was the filing date but only because the
opposing party had not argued that the award was improperly filed or delivered on that date,
“and the record would not support such an allegation.” Olson v. Wexford Clearing Servs. Corp.,
No. 15-6322, Tallakoy, et al. v. Black Fire, et al.
397 F.3d 488, 492 (7th Cir. 2005). The Seventh Circuit’s analysis indicates that where the
issuance date happens to be the same as the filing or delivery date, the three-month period to
challenge the award may begin on that date. However, the operative act to trigger this
three-month period is the filing or delivery of the award, not the issuance alone. Further, the
District of Columbia Circuit used the delivery date rather than the issuance date when
determining when the three-month period began. See Sargent v. Paine Webber Jackson
& Curtis, Inc., 882 F.2d 529, 531 (DC Cir. 1989).
Other courts have disagreed with the district court’s determination that the date of
issuance constitutes the date of filing. See, e.g., Adcock v. Halliburton Energy Servs., Inc.,
No. CIV.A. 2:04-CV-284BR, 2007 WL 496729, at *2 (S.D. Miss. Feb. 13, 2007) (refusing to use
issuance date of an arbitration award as starting time to determine whether a motion to vacate
was timely where Fifth Circuit had not ruled on the issue); White v. Local 46 Metallic Lathers
Union & Reinforcing Iron Workers of N.Y. City, No. 01CIV.8277, 2003 WL 470337, at *4
(S.D.N.Y. Feb. 24, 2003) (stating issuance date, filing date, and delivery date separately, and
using the delivery date to determine timeliness of a motion to vacate).
Here, the record reflects that the Award includes the signature of the arbitrator and a date
of September 23, 2014, but there is no evidence that the arbitrator “filed” the Award or attempted
to “deliver” it to Black Fire by any means on that date or any other date. Assuming that the
Award was “issued” on September 23, 2014, there is no evidence that it was filed or delivered on
that date, which is a requirement under the FAA.
2. Delivery
The district court alternatively found that September 23, 2014, was the date the Award
was delivered. Though Tallakoy asserted that “[t]he Arbitrator issued an award against
No. 15-6322, Tallakoy, et al. v. Black Fire, et al.
Defendants and sent it to the parties pursuant to AAA Rule 49,” it adduced no evidence of
delivery and no such evidence appears in the record.
The finding that September 23, 2014, was the date the Award was delivered on the record
before us is a clearly erroneous finding of fact because it wrongly assumes that because Tallakoy
had received the arbitration award, the arbitrator (1) mailed the award to both parties and (2) that
he mailed the award on September 23, 2014. There is no evidence in the record to support these
assumptions. The lack of evidence is especially concerning in a case like this one where one
party was absent from the arbitration proceeding, and possibly was not mailed a copy of the
Award for that very reason.
It does appear that the district court is correct that the date an arbitration award is placed
in the mail can be considered the date of delivery under AAA Rule 49, but the record does not
support that the arbitrator mailed the Award to Black Fire on September 23, 2014. The district
court’s factual finding that September 23, 2014 was the date of delivery is in error, at least on the
record developed thus far.
ii. October 24, 2014
Initially, the district court determined that Black Fire’s three months to contest the Award
began to run on October 24, 2014, when Tallakoy filed the Award in Tallakoy I. However, the
district court later correctly acknowledged that this was the wrong date. First, the Award was not
filed in a “manner that is permitted by law,” because the complaint in Tallakoy I had been
dismissed and the case had been administratively closed. AAA R. 49. Second, Tallakoy’s
motion to enforce the Award was not served on the unrepresented parties, including Black Fire,
so it was not “delivered” under the FAA on October 24, 2014.
No. 15-6322, Tallakoy, et al. v. Black Fire, et al.
iii. December 23, 2014
On December 23, 2014, Tallakoy filed its complaint in Tallakoy II with a copy of the
Award attached. This was a “filing of the award in any other manner that is permitted by law.”
AAA R. 49. This filing was properly served on all parties so it was also “delivered” under the
AAA rules. This date can be considered the proper date to start Black Fire’s three-month time
period to challenge the Award under FAA § 12 assuming there is no earlier date upon which the
period would begin.
iv. Other dates suggested by Tallakoy
Tallakoy argues that it sent the Award to Black Fire and that it was delivered to various
Black Fire representatives in November 2014. Specifically, Tallakoy argues that it mailed the
Award to each of the defendants on November 13, 2014. It then relies on certified mail receipts
signed by Alice Weed and Gil Brown, purportedly Black Fire representatives, to argue that the
Award had been “delivered” to Black Fire. Further, Tallakoy argues that Stodin received the
Award on October 27, 2014, and thus Black Fire either received the Award or at least knew
about the Award by that date. The district court did not address or make any factual findings as
to these dates. Accordingly, in the interest of justice, we remand this matter to the district court
to determine whether there is evidence to support delivery or knowledge of the Award by Black
Fire on these dates.
Given the inadequacy of the record to determine whether the Award was “filed or
delivered” on September 23, 2014, we reverse the judgment of the district court and remand for
further factual findings consistent with this opinion. As part of its consideration, the district
court should consider whether filing or delivery of the Award occurred in November 2014, on
No. 15-6322, Tallakoy, et al. v. Black Fire, et al.
September 23, 2014, or on other asserted dates. Consequently, we need not address whether the
Award is valid, because the issues of “filing” or “delivery” are not yet resolved.
IV. CONCLUSION
For the reasons stated above, we reverse the decision of the district court and remand for
further proceedings consistent with this opinion.